DMS Offshore Investment Services expands FATCA task force

By Emily.Perryman

Created 13/02/2014 - 15:15

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Fund governance firm DMS Offshore Investment Services has expanded its FATCA task force with the addition of Alaina Danley, formerly director of finance at Bain Capital, and Jennifer Dimitri, formerly director of investment compliance at the University of North Carolina endowment system.

Now comprising seven members, the DMS FATCA Task Force is led by Peter Stafford, formerly a senior partner with Appleby.

It brings together experts in compliance, law, accounting, finance and technology, to develop best practices for responding to the Foreign Account Tax Compliance Act (FATCA), a sweeping piece of legislation through which the United States aims to ensure disclosure of tax information related to offshore accounts.

“This legislation will transform the investment funds industry and dramatically impact investors with offshore accounts,” says Don Seymour, founder of DMS. “The genesis of the task force began in 2010 when Congress passed the Hiring Incentives to Restore Employment (HIRE) Act, so we have the advantage of being one of the first to tackle the challenges of the regulation. Our team at DMS has researched and formulated ideas about FATCA and how fund governance can best respond to mitigate any impact FATCA can have on the health of the funds industry.”

The DMS FATCA Task Force uses proprietary research and technology to help foreign financial institutions (FFIs) successfully navigate the new legislation, which is expected to put tremendous administrative and cost burdens on hedge funds and managers once it goes into effect on 1 July 2014.

The legislation, named by AITE Group as the most significant regulation affecting the hedge fund landscape, requires FFIs to report information to the IRS about financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest, or face severe penalties such as a 30 per cent withholding tax.

Additionally, FFIs that fail to comply with FATCA rules could face closure of their accounts, or find themselves locked out from doing business with organisations and counterparties that interact with US financial institutions and compliant FFIs.

In order to avoid these penalties and reputational risks, FFIs must be registered with the IRS by 25 April 2014 to avoid being listed as a non-participating financial institution when FATCA goes live on 1 July 2014.

The IRS will post its first FFI list on its FATCA portal by 2 June, marking all absent FFIs with a non-complying “scarlet letter” that could hinder their ability to do business. This list will be updated monthly.

The DMS FATCA Task Force focuses on the FATCA implications for private funds and how to enhance fund governance to respond to this specialised oversight responsibility. It will also fulfil all the duties required of an FATCA Responsible Officer (FRO) under the legislation including:

· Expertise and oversight to address the regulatory risks imposed by FATCA and those under the intergovernmental agreement and applicable domestic regulations;
· Independent oversight with checks and balances that may not be achieved with a single FRO within an organisation;
· Deep industry relationships achieved through DMS’ service in fund governance and ability to spot emerging trends;
· A dedicated in-house technology team that created the proprietary DMS Tracker, DMS’ market leading fund governance technology that effectively monitors and synthesises complex information flows to support sound governance decisions, quality assurance and reporting.

“We are not just researching and providing insights,” says Stafford. “DMS is building upon its fund governance foundation and providing clients a solution that allows them to address FATCA in terms of taxation, reputation, marketability and ultimately protects their assets under management.”